The difference between 2-year swap rates and Treasury yields has widened back to 37.5 basis points which is the highest since March 2012. Societe Generale analysts led bySubadra Rajappaexpect net bill issuance to drop by about $150 billion as Treasury shrinks its cash balance to $23 billion by the March 15 deadline.

And to make things even more clear, something odd is going on in the Treasury bill market..

Bloomberg notes that investors are willing to pay more for bills maturing in three weeks instead of two.

That’s because they don’t want to be caught empty handed while the Treasury slows debt sales to push its cash balance lower as part of the 2015 pact to suspend the debt ceiling. The spread between the March 9 and March 16 bills may get a “a little more noticeable” as Treasury cuts issuance and provides a “clearer sense of how long bill supply is going to be lower than normal” going into the March 15 deadline, Jefferies economistThomas Simonssaid in a phone interview.

“I think what people are missing is this date, March 15th 2017. That’s the day that this debt ceiling holiday that Obama and Boehner put together right before the last election in October of 2015. That holiday expires. The debt ceiling will freeze in at $20 trillion. It will then be law. It will be a hard stop. The Treasury will have roughly $200 billion in cash. We are burning cash at a $75 billion a month rate. By summer, they will be out of cash. Then we will be in the mother of all debt ceiling crises. Everything will grind to a halt. I think we will have a government shutdown. There will not be Obama Care repeal and replace. There will be no tax cut. There will be no infrastructure stimulus. There will be just one giant fiscal bloodbath over a debt ceiling that has to be increased and no one wants to vote for.”

Stockman also predicts very positive price moves for gold and silver as a result of the coming budget calamity.